Past, Present and Future

Accrual Accounting in Malta

17 September 2015

Treasury Department

MINISTRY FOR FINANCE

Michael Zammit Munro

Past: where are we coming from?

Present: where are we now?

Future: where are we heading?

Overview

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Past: where are we coming from?

1996

DAS, the cash-based Departmental Accounting System, introduced in Central Government.

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1999

Accrual Accounting Task Force set up to implement accrual accounting in Central Government.

1999

1st circular on Government Accrual Accounting 14/99: Government Accrual Accounting: Revised Inventory Control Regulations

Past: where are we coming from?

2001-2004

Other circulars focussed on accrual accounting concepts.

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2001 Malta Government Accounting Standards (MGASs) issued.

Accrual accounting information is being submitted to the National Statistics Office (NSO) for National Accounts reporting purposes to Eurostat.

2015

• Implementation of Public Finance Management Reform

Accrual Accounting/IPSAS Project

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Present: where are we now?

• Three fundamental pillars:

I.T. DAS

Replacement

H.R. Skilled&

Sufficient Staff

Accrual Accounting Standards

IPSAS

• 2014: Tender for the Corporate Financial Management Solution (CFMS) published.

Present: where are we now?

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I.T.

• Tender at adjudication stage.

• CFMS shall be a full-accrual accounting package, having two Core Modules: o Financial Management Modules o Budgetary Management Modules

Present: where are we now?

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Financial Management Modules

Nominal ledger Services & Receivables Purchases & Payables Stock Control Cash Management Fixed Assets Management

Budgetary Management Modules

Budgetary Administration Commitment Authorising & Tracking

• Finance function in every ministry & department:

Accountant

Accounts Executives

Accounts Clerks

Present: where are we now?

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H.R.

Present: where are we now?

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• Chartered Institute of Public Finance & Accountancy (CIPFA): scoping study on development of a Government Finance Profession.

• Learning and Development Strategy with the Centre for Development Research and Training (CDRT).

H.R.

International Public Sector Accounting Standards (IPSAS) - the way forward.

PwC Belgium: ‘Introductory IPSAS Seminar’.

Present: where are we now?

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IPSAS

2011

2012

2013 CIPFA: Gap analysis for the transition to accrual reporting.

2013 Two IPSAS Workshops (as preparation for gap analysis).

2013 CIPFA report ‘Transition to Accrual Accounting: Scoping Study’.

CIPFA’s Gap Analysis - 5 issues:

Present: where are we now?

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Accounting Systems Processes

People Other

Current system of cash accounting plus accrual templates does not meet IPSAS requirements.

Present: where are we now?

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Full accrual accounting policies need to be developed and implemented.

Taxation income based on legacy systems is probably inadequate.

Quality of debtors/creditors current information variable depending on employees’ skills.

Fixed Assets current data - incomplete.

Gap analysis: Accounting Issues

Replacement of DAS – critical.

Present: where are we now?

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Processes - reviewed and redesigned.

System Issues

Process Issues

People Issues Small full time central project team.

Sufficient qualified & appropriately experienced accountants at all levels - critical.

Other Issues Control weaknesses.

IPSAS Project Board

Project Governance Structure

Chairman: Accountant General

Members: FPMD, NSO, IAID, Budget Office, EU Budget

Directorate, MITA, NAO (observer)

Board Secretary: Office of PS

IPSAS Project Team Team Leader: Director (Government Accounts)

Members: FPMD, NSO, EU Budget Directorate,

Treasury, MITA

Team Secretary: Treasury

Learning & Development Strategy

CDRT, MIA, CIPFA

Ministry for Finance MITA

Communication Strategy

I.T. Expertise

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• Presentation of IPSAS Implementation Project Plan.

Present: where are we now?

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IPSAS

2014

• Implementation strategy based on a phased approach.

• A phased approach: allows for implementation of the new I.T. solution and for necessary IPSAS skills and expertise to develop.

Development of Policies and Circulars

Development of Business Processes

Development of Legislation

Dry Run – new policies, procedures, systems in MFIN

1st Year Accounts & Audit (dry run) in MFIN

Pilot test - policies, procedures, systems in selected

ministries/departments

2nd Year Accounts & Audit (pilot) in selected ministries/departments

Full implementation - policies, procedures, systems in all ministries/departments

3rd Year Accounts & Audit (full) in all ministries/departments

On going

Year 1

Year 2

Year 3

Phased Approach to IPSAS Implementation

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• IPSAS Project Team – currently focused on fixed assets’ related IPSASs.

Present: where are we now?

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IPSAS as adopted by the Maltese Government

• IPSASs being proposed as national standards: IPSAS as adopted by the Maltese Government.

• Original IPSAS on PP&E: option - the Cost Model or Revaluation Model.

•IPSAS as adopted by the Maltese Government: Cost Model only, except for specific circumstances (e.g. land and buildings).

• IPSAS variations to the original standards discussed with CIPFA .

Present: where are we now?

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IPSAS as adopted by the Maltese Government

• The Malta Institute of Accountants (MIA) receives a copy of the national standards to provide input to the team.

Present: where are we now?

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IPSAS as adopted by the Maltese Government

Standards analysed by the IPSAS Project Team: o IPSAS 17 Property, Plant & Equipment o IPSAS 21 Impairment of non-Cash Generating Assets o IPSAS 26 Impairment of Cash Generating Assets o IPSAS 31 Intangible Assets o IPSAS 13 Leases o IPSAS 16 Investment Property o IPSAS 5 Borrowing Costs

Present: where are we now?

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IPSAS as adopted by the Maltese Government

Standards approved by the IPSAS Project Board: o IPSAS 17 Property, Plant & Equipment o IPSAS 21 Impairment of non-Cash Generating Assets o IPSAS 26 Impairment of Cash Generating Assets o IPSAS 31 Intangible Assets

Present: where are we now?

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IPSAS as adopted by the Maltese Government

• User-friendly Guidelines issued with each standard.

• An Asset Management Framework proposed by IPSAS Project Team.

Present: where are we now?

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IPSAS as adopted by the Maltese Government

Discussions with ministries and departments:

Education Ministry/Department Government Property Department Armed Forces of Malta Police Department Customs Department Health Ministry/Departments

Present: where are we now?

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EPSAS

• Participation in European Public Sector Accounting Standards (EPSAS) development.

• Representatives from Treasury on EPSAS Task Forces and Working Group.

http://www.epsas.eu/en/

2016 and beyond – the 3 pillars

• CFMS (DAS Replacement) tender award: by the end of the first quarter of 2016.

Future: where are we heading?

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I.T.

• Proper Finance Function in each ministry and department.

Future: where are we heading?

2016 and beyond – the 3 pillars

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H.R.

•Implementation of a training strategy across all levels of Government.

• Government Finance Profession in Central Government.

• Fixed Assets’ policies & circulars - review and revision. • IPSAS 23 Revenue from Non - Exchange Transactions - CIPFA project. • Preparation of Opening Balance Sheet. • IPSAS 33: First-time Adoption. • Review of Public Finance Management Legislation.

Future: where are we heading?

2016 and beyond – the 3 pillars

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IPSAS

• The success of this reform also depends on you!

• Taking ownership of these developments is critical for the reform to be a success.

Future: where are we heading?

2016 and beyond

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• There will be challenges and obstacles to overcome, but we are confident that if all of us here today do our part, we will succeed to finally get our act together!

Future: where are we heading?

2016 and beyond

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The IPSAS PROJECT TEAM Michael Zammit Munro – Team Leader (Treasury)

Mariestell Dalli – Member (Treasury) Claire Lewis – Member (Treasury) Noel Bezzina – Member (FPMD)

Ruth Degabriele – Member (MITA) Sarah Cachia – Member (NSO)

Angele Mangion – Member (EU Budget) Mariella Axiak – Secretary (Treasury)

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